Education isn’t just for the young – it’s also for the young at heart. In the future, the changing world of work will send many mid-life adults back to school for better career options. And surveys show that retirement-minded Baby Boomers want to continue working after retirement, often in a new career, or round out their knowledge in their golden years.
If you think you might go back to school in the future, there’s a great savings vehicle that you can use. Congress created the state-sponsored 529 Plans to encourage parents to save for the high cost of college for children. Though you can’t get a tax deduction for the money you put into those plans, the growth will be tax-free if you use the funds for higher education expenses.
What many people don’t realize is that 529 plans aren’t just a good idea for children — you can set up a 529 plan for yourself.
If you think you might go back to school years from now, this is a good time to start saving. Your 529 contributions can grow, and the funds will come out tax-free when you later withdraw them as a student. You can use the money for tuition, fees, books, supplies and equipment you need to attend any college, university or vocational school, as long as that school is qualified by the Department of Education to participate in its student aid programs.
You might be surprised by what programs qualify. If you aren’t looking for practical tools like an MBA, a teaching credential, or a nursing license, what about an ecological field trip to Costa Rica, a semester at sea studying marine biology, a year studying French in Paris, or a summer of music appreciation in Vienna? The joy of learning can include travel and exploration of new fields. Some colleges are designing programs to train mature students for leadership work in public service.
What if your plans change, and you don’t go to school? If you have money left over that you don’t use, you can transfer what’s left in your 529 plan to another beneficiary—child, grandchild, niece, nephew. Or, if you decide to withdraw the funds to pay for non-qualified expenses, you will owe tax on the earnings plus a 10 % penalty. The principal you contributed can be withdrawn tax- and penalty-free.
A 529 Plan could help shape your future. Having the money available just might encourage you to take that class you’ve been dreaming about.